Posted on 06/25/2002 11:53:45 PM PDT by JohnHuang2
ASHINGTON, June 25 — As it scrambled early this month to put together an application for $900 million in federal loan guarantees that it says are vital to its survival, US Airways encountered a more immediate problem: a provision in a Senate spending bill that would have cut the size of the loan guarantee program.
So US Airways began a lobbying onslaught that drew on all the political leverage enjoyed by a major employer with operations in many states, a record as a generous campaign contributor and a claim to being a part of the nation's transportation backbone.
Because it has major hubs in Pittsburgh and Philadelphia, it quickly lined up support from the Pennsylvania Congressional delegation. The governor of Pennsylvania, Mark Schweiker, wrote to President Bush. Members of both parties from other states where the carrier has a presence, including North Carolina and Virginia, pledged their support. The airline's employees called, faxed and e-mailed their pleas to Capitol Hill, saying it would be unfair to scale back the program.
The Senate then voted 91-to-4 a few weeks ago to strip out the provision, removing an obstacle to the airline's getting what it wanted.
But US Airways still faces hurdles, including a provision in the House version of the spending bill that would delay any further loan guarantees until the start of the next fiscal year on Oct. 1, maybe too late to keep the airline out of bankruptcy proceedings.
Even if it irons out the problems it faces in Congress, US Airways — and other struggling airlines that have applied for government help, including United, a unit of UAL, which on Monday sought $1.8 billion in loan guarantees — must then persuade a federal panel to grant the assistance.
When it was conceived in the wake of the terrorist attacks, the loan guarantee program enjoyed bipartisan support and was widely seen as a measured response — along with $5 billion in cash aid disbursed to the airline industry — to the brief grounding of air traffic after the attacks and the slide in air travel.
But Washington has since become somewhat divided about the program, forcing carriers seeking aid to take an aggressive stance toward convincing Congress and the panel, the Air Transportation Stabilization Board, that they really need and deserve the help.
"Generally speaking, the administration is disinclined to carry out the program with vigor," said John Heimlich, director of economic and market research for the Air Transport Association, the airline industry's trade group. "They strongly believe in pure market solutions. Having said that, I think they will faithfully execute the law."
Congress has considered cutting or delaying the program. The Bush administration has left some industry executives and analysts with the impression that it is ideologically uncomfortable dispensing government aid to industry and unhappy at the prospect of picking winners and losers in a free market. And while more airlines are seeking help through the program after leaving it untapped in the months after Sept. 11, healthy carriers and foreign competitors have said they are upset at the idea of their rivals receiving government subsidies.
Analysts say United and, to a lesser extent, US Airways stand a good chance of winning the loan guarantees. One previous applicant, America West, has been successful, receiving $380 million in loan guarantees late last year, but only after agreeing to strict terms, including granting the government a chance to acquire up to 30 percent of the company.
Two smaller carriers were turned down. Applications from four airlines — Evergreen International, Spirit Airlines, National Airlines and American Trans Air — are pending.
United and US Airways have the advantage of size. They serve hundreds of airports and have thousands of jobs on the line at a time when the administration is keenly sensitive to the political implications of the weak economic recovery. And no administration wants to be responsible for turmoil among airlines during the summer vacation season.
"Under the guidelines, the way they're written, United qualifies because if it hadn't been for the terrorist attacks, they wouldn't have been in as much distress," said Darryl Jenkins, director of the Aviation Institute at George Washington University in Washington.
"US Airways will get it because they're in the state of Virginia, in Pennsylvania and North Carolina," Mr. Jenkins said. "That's six senators and 30 congressmen. No ifs, ands or buts — they'll both get it. This thing is, in fact, political now, because it's Washington and everything is political."
But other experts said neither United nor US Airways was likely to have an easy time with the stabilization board, and might end up with less than they are asking for. They said America West was forced into intensive negotiations over its application and ultimately agreed to much tougher terms for the loan guarantees than it had first sought.
Betsy Hollohan, a board spokeswoman, said the panel would "walk a fine line between helping the air carriers that need the help and protecting the interests of taxpayers."
Both US Airways and United said they expected their applications to stand on the merits.
"We've presented a viable business plan," said Susana Leyva, a spokeswoman for United. "It's not a political issue, it's a financial issue."
David Castelveter, a spokesman for US Airways, said, "They want assurances we can pay back the loan, and we're going to give them assurances that we can pay back the loan."
But Mr. Castelveter said the carrier would also continue to make its case in the political arena.
"Our elected officials realize how important this is to us and the constituents in the districts they represent," he said. "We would be happy to see our loan application approved by whatever means that takes."
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